Appeal Court affirms trial court verdict that City did not breach its contract with credit union in taxi medallion case
SAN FRANCISCO (March 1, 2024) — City Attorney David Chiu announced today that the California Court of Appeal ruled in the City’s favor in a lawsuit brought by the San Francisco Federal Credit Union (SFFCU) against the San Francisco Municipal Transportation Agency (SFMTA) over loans the credit union issued for taxi medallions. The Court of Appeal affirmed a lower court jury verdict that found the City did not breach its lender agreement with SFFCU.
“We are pleased the Court affirmed that the City did not break its contract and acted in good faith,” said City Attorney Chiu. “We are hopeful the credit union will engage with the City on ways we can improve the taxi medallion program.”
Background
Taxi medallions are permits that allow taxicab drivers to operate in the issuing city. In 1978, San Francisco voters passed Proposition K, which provided free, non-transferrable taxi medallions distributed pursuant to a waitlist. Because the waitlist for a free medallion became extraordinarily lengthy, SFMTA altered the medallion program and offered transferable medallions for purchase at $250,000 per medallion. In 2010 and again in 2013, SFFCU entered into a lender agreement with SFMTA, making the bank a qualified lender that could help taxi drivers finance medallion purchases.
Meanwhile, transportation network companies like Uber and Lyft began operating in San Francisco, which adversely affected the profitability and demand of taxi medallions. SFFCU began foreclosing on taxi drivers, and no taxi medallions have been sold since 2016.
SFFCU sued the City alleging breach of contract and breach of the covenant of good faith and fair dealing for failure to maintain a viable market for the taxi medallions.
In October 2021, a jury in San Francisco Superior Court found that the City did not breach the lender agreement or act in bad faith. SFFCU appealed the jury’s decision to the California Court of Appeal, which affirmed the verdict today.
This case was staffed and litigated by Rebecca Bers, Pamela Cheeseborough, Susan Cleveland-Knowles, Sara Eisenberg, Jim Emery, Leslie Fernandez, Sarah Gutierrez, Jaime Huling Delaye, Ronald Lee, Yvonne Meré, Michaela O’Rourke, Tara Steeley, Stephanie Stuart, and Meryle Tank.
The case is San Francisco Federal Credit Union, v. San Francisco Municipal Transportation Authority, California Court of Appeal, First Appellate District, Case No. A164463. The order can be found here.
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